Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Council of the Law Society of NSW v Hancock [2013] NSWADT 63
• Hearing dates: 10, 11 and 12 December 2012
• Decision date: 21 March 2013
• Jurisdiction: Legal Services Division
• Before: M Chesterman, Deputy President; M Riordan, Judicial Member; E Hayes, Non-judicial Member

Decision

1. The Respondent is guilty of professional misconduct on each of the three Grounds of the Amended Application for Original Decision, except as alleged in subparagraph (ii) of Ground 1.

2. The proceedings are set down for further directions at 9.30 a.m. on Tuesday 26 March 2013.

• Catchwords: Solicitor - disciplinary application - purporting to act as solicitor without having been retained - false and misleading representations that retainer existed - obtaining fee as mortgage broker without entitlement
• Legislation Cited: Legal Profession Act 2004
• Cases Cited: Allinson v General Council of Medical Education and Registration [1894] 1 QB 750; Council of the Law Society of New South Wales v Clapin (No 2) [2011] NSWADT 246; Law Society of New South Wales v MacKenzie [2003] NSWADT 92; New South Wales Bar Association v Cummins (2001) 52 NSWLR 279; [2001] NSWCA 284; Prothonotary of the Supreme Court of New South Wales v Nikolaidis [2010] NSWCA 73
• Texts Cited: Riley, Solicitors Manual
• Category: Principal judgment
• Parties: Council of the Law Society of New South Wales (Applicant); John Leslie Hancock (Respondent)
• Representation: Counsel; S Barnes (Applicant); D Allen (Respondent); Council of the Law Society of New South Wales (Applicant); Hancocks Solicitors (Respondent)
• File Number(s): 122006

reasons for decision

Procedural history

1 On 7 March 2012, the Council of the Law Society (hereafter 'the Law Society') filed an Application for Original Decision naming John Leslie Hancock (hereafter 'the Solicitor') as Respondent, claiming that he had engaged in professional misconduct and seeking orders against him as follows: (a) that his name be removed from the Roll of legal practitioners; (b) that he pay the Law Society's costs; and (c) any further or other order as the Tribunal deemed fit.

2 On the same day, the Law Society filed affidavits sworn by the following deponents on the dates indicated: Ms Anne-Marie Foord, its solicitor (6 March 2012); Mr Abdallah Hadid (2 June 2011); Mrs Sanaa Hadid (9 June 2011); and Mr Manuel Theos (1 August 2011).

3 On 4 June 2012, the Solicitor filed a Reply. On 5 June and 12 November 2012, he filed affidavits sworn by him on the dates of filing.

4 The matter was heard before us on 10, 11 and 12 December 2012. Mr Barnes of counsel appeared for the Law Society and Mr Allen of counsel for the Solicitor.

5 At the commencement of the hearing, Mr Barnes sought leave under section 555 of the Legal Profession Act 2004 ('the LP Act') to amend the Application for Original Decision. Leave was opposed. After hearing argument, we granted leave with respect to some of the amendments sought. On the second day of the hearing, Mr Barnes handed up an Amended Application for Original Decision ('the Amended Application') incorporating these amendments.

The Grounds and Particulars relied on

6 In the Amended Application, three Grounds were advanced, in the following terms:-

Professional Misconduct

1. Purporting to act for Mr Abdallah Hadid and Mrs Sanaa Hadid ('the mortgagors') in the matter of their obtaining an advance of the sum of $130,000 from Mrs Abeeda Khan ('the mortgagee') on the security of their property at 662 Punchbowl Road, Punchbowl in the State of New South Wales ('the matter') in circumstances where:

(i) The Solicitor was not instructed by the mortgagors to act for them in relation to the matter; and

(ii) The mortgagors had no knowledge of the matter.

2. In purporting to so act, the Solicitor made representations to a finance broker, Peter Fisher & Co, the solicitor for the mortgagee, Mr Manuel Theos of Messrs Heidtman & Co. and an agent of the mortgagee, Mr Andrew Littleford of Response Finance which, to his knowledge, were false and misleading.

(See Particulars 2, 5, 8, 9, 10, 13, 14, 15, 16, 17, 18, 19 and 21 below)

3. Upon settlement the Solicitor provided to the solicitor for the mortgagee a written direction to pay part of the loan advance to his company named Split Cycle International Pty Ltd in circumstances where he had no entitlement to do so.

7 The amendments that had been made to these Grounds took the form of additions to Ground 2, including the final sentence (in parenthesis).

8 During the hearing, we were advised that the Law Society did not press paragraphs 9, 9A, 12 and 20 of the Particulars. With these paragraphs omitted, the Particulars were as follows:-

Introduction

Mrs Abdallah Hadid and Mrs Sanaa Hadid [ "the mortgagors" ] owned a property at 662 Punchbowl Road, Punchbowl in the Sate (sic) of New South Wales.

Mr John Leslie Hancock [ "the Solicitor" ] was never instructed by either or both of the mortgagors to act for them in the matter.

Notwithstanding that he was not instructed to act, the Solicitor in relation to the matter:

Friday 15 November 2002

1. On 15 November 2002 the Solicitor made a telephone call to a Mr Peter Fisher of Peter Fisher & Co. ("Peter Fisher"), mortgage-broker.

2. On 15 November 2002 the Solicitor forwarded by facsimile transmission a letter dated 15 November 2002 to Peter Fisher:

2.1 on the letterhead of "Hancocks Solicitors" which was signed "Hancocks Solicitors" with the Solicitor's personal signature; and

2.2 in which the Solicitor referred to the mortgagors as "our clients"; and

2.3 under cover of which the Solicitor enclosed a Real Estate agent's appraisal of the value of the 662 Punchbowl Road, Punchbowl property, a statement of account from the first mortgagee, and a title identifier.

2A The representation in 2.2 was false because the Solicitor was not instructed to act for the mortgagors in the matter.

2B The representations in 2.1 and 2.2 were misleading in that they stated and/or implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

Monday 18 November 2002

3. On I8 November 2002 the Solicitor received from Peter Fisher a facsimile which inter alia enclosed a loan application package of documents and a document entitled "Authority to Act" and requested the return to him of the completed documents.

4. On 18 November 2002 the Solicitor forwarded by facsimile transmission to Irena Bradaric the documents received from Peter Fisher as set out in paragraph 3 above.

Tuesday 19 November 2002

5. On 19 November 2002 the Solicitor forwarded by facsimile transmission a letter dated 19 November 2002 to Peter Fisher:

5.1 on the letterhead of "Hancocks Solicitors" which was signed "Hancocks Solicitors" with the Solicitor's personal signature; and

5.2 in which inter alia the Solicitor confirmed his understanding that all documents required by Mr Fisher had been supplied but nevertheless enclosed further copies of them.

5A The representations in 5.1 and 5.2 were misleading in that they implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

Wednesday 20 November 2002

6. On 20 November 2002 the Solicitor received by facsimile transmission a letter dated 20 November 2002 from Peter Fisher:

6.1 in which Peter Fisher advised he had not received the completed loan application documents until he received the Solicitor's fax of 19 November 2002; and

6.2 to which was attached inter alia a Letter of Offer dated 20 November 2002 from Response Finance which set out the terms and conditions of a loan advance of $120,000.00 to the mortgagors.

7. On 20 November 2002 the Solicitor forwarded to Irena Bradaric the facsimile and attached documents received from Peter Fisher as set out in paragraph 6 above.

8. On 20 November 2002 you (sic) forwarded to Mr Andrew Littleford, Manager of Response Finance ("Mr Littleford") by facsimile transmission a letter dated 20 November 2002:

8.1 on the letterhead of "Hancocks Solicitors" which was signed "Hancocks Solicitors" with the Solicitor's personal signature; and

8.2 in which the Solicitor requested a deduction from the mortgage advance of a sum of $3300.00 payable to Split Cycle International Pty Limited, a company owned by the Solicitor.

8A The representations in 8.1 and 8.2 were misleading in that they implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

8B The representation in 8.2 was false because the Solicitor was not instructed to act for the mortgagors in the matter.

9...

9A...

10. On 20 November 2002 the Solicitor received a telephone call from a Mr Manuel Theos, Solicitor for the mortgagee ("Mr Theos"), during which:

10.1 Mr Theos told the Solicitor that the mortgage documents had been prepared; and

10.2 the Solicitor requested the documents be left for collection at the reception desk of Mr Theos' office.

1OA The representation in 10.2 was misleading in that it implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

Thursday 21 November 2002

11. On 21 November 2002 the Solicitor received by facsimile transmission a letter dated 21 November 2002 from Peter Fisher in which Peter Fisher stated inter alia:

"We advise that we have informed lrena that the mortgage documents are ready to be collected which I believe is being done."

12...

Friday 22 November 2012

13. On 22 November 2002 the Solicitor had a telephone discussion with Mr Theos who advised the Solicitor that the returned mortgage documents were deficient.

The Solicitor said that he would forward to Mr Theos evidence of current insurance of the property, the outstanding debt owed to the first mortgagee and a direction to pay.

13A The representation in 13 was misleading in that it implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

14. On 22 November 2002 the Solicitor forwarded to Mr Theos a letter dated 22 November 2002:

14.1 on the letterhead of "Hancocks Solicitors" which was signed "Hancocks Solicitors" with the Solicitor's personal signature; and

14.2 under cover of which the Solicitor enclosed copies of the following documents:

(i) "Certificate of insurance from GIO noting the interests of Response Finance"; and

(ii) "Letter of AAA Mortgages dated 22 November 2002" which set out the balance remaining under the first mortgage.

14A The representations in 14.1 and 14.2 were misleading in that they implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

15. On 22 November 2002 the Solicitor forwarded to Mr Littleford a letter dated 22 November 2002:

15.1 on the letterhead of "Hancocks Solicitors" which was signed "Hancocks Solicitors" with the Solicitor's personal signature; and

15.2 under cover of which the Solicitor enclosed copies of the documents set out in paragraph 14.2 above.

15A The representations in 15.1 and 15.2 were misleading in that they implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

16. On 22 November 2002 the Solicitor forwarded to Mr Theos a letter dated 22 November 2002:

16.1 on the letterhead of "Hancocks Solicitors" which was signed "Hancocks Solicitors" with the Solicitor's personal signature; and

16.2 in which the Solicitor gave directions as to how the mortgage advance should be paid; and

16.3 which directions included that a cheque be drawn in the sum of $4400.00 payable to Split Cycle International Pty Limited, a company owned by the Solicitor.

16A The representation in 16.2 and 16.2 (sic) were (sic) false because the Solicitor was not instructed to act for the mortgagors in the matter.

16B The representations in 16.1, 16.2 and 16.3 were misleading in that they implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

17. On 22 November 2002 the Solicitor had a telephone discussion with Mr Theos during which the Solicitor provided information as to why it was necessary for cheques to be drawn on settlement payable to Split Cycle International Pty Limited and Overseas Travel Service.

17A The representation in 17 was false because the Solicitor was not instructed to act for the mortgagors in the matter.

17B The representation in 17 was misleading in that it implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

Monday 26 November 2002

18. On 25 November 2002 the Solicitor attended upon settlement of the mortgage advance at Mr Theos' office and received cheques payable to Split Cycle International Pty Ltd and Overseas Travel Service.

18A The representations in 18 were misleading in that they implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

19. At the settlement:

19.1 the Solicitor confirmed to Mr Theos that he was acting for the mortgagors; and

19.2 the Solicitor provided Mr Theos with an explanation as to why the Solicitor had not provided the mortgagors with a certificate of independent advice nor explained the mortgage documents to them.

19A The representations in 19.1 and 19.2 were false because the Solicitor was not instructed to act for the mortgagors in the matter.

19B The representations in 19.1 and 19.2 were misleading in that they implied that the Solicitor was instructed to act for the mortgagors in the matter and was likely to mislead the representee to form a view that the Solicitor was so instructed.

20...

21. On 2 December 2002 the Solicitor had a telephone discussion with Mr Theos during which he confirmed that he had acted on Mr Hadid's instructions.

21A The representation in 21 was false because the Solicitor was not instructed to act for the mortgagors in the matter.

22. On 4 December 2002 the Solicitor forwarded to Mr Theos a letter dated 4 December 2002:

22.1 on the letterhead of "Hancocks Solicitors" which was signed "Hancocks Solicitors" with the Solicitor's personal signature; and

22.2 under cover of which the Solicitor enclosed a copy of a document entitled "Heads of Agreement dated 2nd November 2002 between Mr Abdallah Hadid and Mrs Maria Anna Palumbo".

9 The amendments to these Particulars involved the insertion of all the paragraphs whose numbers conclude with the letter 'A' or 'B': for example, paragraphs 2A and 2B.

10 Henceforth, we will identify the numbered paragraphs of these Particulars with the letter 'P'.

The Solicitor's response to the Law Society's allegations

11 In his Reply, which was filed before the Application was amended, the Solicitor admitted the allegation in Ground 1(i) - i.e., that he was not instructed by the mortgagors (Mr and Mrs Hadid) to act as their solicitor in relation to 'the matter'. He claimed instead that he acted in the role of mortgage broker, pursuant to instructions from Mr Hadid. The Solicitor denied the allegation in Ground 1(ii) that the mortgagors had no knowledge of 'the matter'.

12 He also denied Ground 2, maintaining that while he did represent to Mr Theos and Mr Littleford that he acted for Mr and Mrs Hadid, it was in the capacity of a mortgage broker, not that of a solicitor.

13 In relation to Ground 3, the Solicitor stated (a) that he gave the written direction for part of the loan advance to be paid to Split Cycle International Pty Ltd ('Split Cycle') in his capacity as director of that company, which was acting as a mortgage broker and (b) that Split Cycle had 'an entitlement to the commission'.

14 The Solicitor also acknowledged, with reference to Grounds 2 and 3, that it was a 'mistake' on his part to use the letterhead of his firm Hancocks Solicitors when writing to Mr Theos and Mr Littleford and when giving the written direction.

15 On the first day of the hearing, Mr Allen handed up a document stating that the Solicitor admitted the following paragraphs of the Particulars contained in the Application in its unamended form: 1, 2 (except 2.3), 3 (except for the words 'requested the return to him of the completed documents'), 4, 5 (except for the words 'but nevertheless enclosed further copies of them'), 6, 7, 8, 11, 14, 16 and 22.

The evidence

16 At the hearing, Mr Barnes, appearing for the Law Society, tendered the affidavits of Ms Foord, Mr Hadid, Mrs Hadid and Mr Theos that had previously been filed. He also tendered copies of documents that had formed part of the evidence in proceedings commenced in the Supreme Court in 2003 (hereafter 'the Supreme Court proceedings'), in which the parties included the Solicitor and Mr and Mrs Hadid. With some omissions, this tendered material was admitted. Mr and Mrs Hadid and Mr Theos attended and were cross-examined.

17 Mr Allen, appearing for the Solicitor, tendered a copy of an affidavit that Ms

Irena Bradaric had sworn on 3 June 2005 for the purposes of the Supreme Court proceedings. She attended and was cross-examined.

18 Mr Allen did not call the Solicitor as a witness or tender either of the affidavits sworn by him that had been filed.

19 In determining the extent to which this evidence, along with the admissions made by the Solicitor, establishes the matters alleged by the Law Society, it is convenient to deal with each of the three Grounds separately.

Ground 1: Purporting to act for Mr and Mrs Hadid

20 The Solicitor admitted the specific allegation made in subparagraph (i) of this Ground: namely that he did not have instructions from the mortgagors (Mr and Mrs Hadid) to act as their solicitor in the matter of their obtaining a loan of $130,000 from the mortgagee (Mrs Khan) on the security of their property at Punchbowl. He contended, however, that he acted in this matter as their mortgage broker, and did not purport to act as their solicitor.

21 The Solicitor denied the allegation made in subparagraph (ii). He maintained that Mr Hadid, if not also Mrs Hadid, had knowledge of 'the matter'.

22 Purporting to act as a solicitor. The Law Society's claim that the capacity in which the Solicitor purported to act for Mr and Mrs Hadid was that of a solicitor was based to a substantial extent on the content and format of the six letters described in P2, P5, P8, P14, P16 and P22. Copies of each of these letters were in evidence. The Society (as we understood its case) did not rely on the letter in P15 because this letter was not in evidence.

23 As stated in the Particulars, each of the six letters relied on was written on the letterhead of the Solicitor's firm, Hancocks Solicitors, and bore his signature. Their headings included the name 'Hadid' and the phrase 'Short term finance over 662 Punchbowl Road, Punchbowl'. They were all sent by fax.

24 In these letters, the content of the communications that the Solicitor made on behalf of Mr and Mrs Hadid can be summarised in the following manner.

25 Letter to Mr Fisher dated 15 November 2002 (P2): The Solicitor stated that Mr and Mrs Hadid, whom he described as 'our clients', wanted to obtain short term finance of $130,000 secured on their property at Punchbowl. He enclosed copies of (a) an estate agent's appraisal of this property; (b) a loan statement and tax invoice relating to a first mortgage over the property; and (c) a Land Titles Office search of the property.

26 We observe here that although the Solicitor did not admit the allegation in P2.3 (to the effect that he enclosed certain documents with his letter of 15 November 2002), it was clearly established by the evidence.

27 Letter to Mr Fisher dated 19 November 2002 (P5): the Solicitor asked for confirmation that all documents required under Mr Fisher's 'checklist' had been supplied and requested Mr Fisher's assistance in finalising this 'urgent' matter 'hopefully tomorrow'.

28 We observe here that although the Solicitor did not admit the allegation in P5.2 (to the effect that in his letter of 19 November 2002 he enclosed further copies of the documents already sent to Mr Fisher), it was clearly established by the evidence.

29 Letter to Mr Littleford dated 20 November 2002 (P8): the Solicitor asked that the sum of $3,300, payable to Split Cycle, should be deducted from the loan (stated at that stage to be in the amount of $120,000) being offered to Mr and Mrs Hadid, adding that this would be 'confirmed in writing by the clients prior to settlement'.

30 Letter to Mr Theos dated 22 November 2002 (P14): the Solicitor enclosed copies of (a) a certificate of insurance of Mr and Mrs Hadid's property at Punchbowl and (b) a letter from the first mortgagee. He stated: 'The cheque direction will shortly be forwarded to your office.'

31 Letter to Mr Theos also dated 22 November 2002 (P16): the Solicitor asked Mr Theos to arrange for five cheques to be 'drawn from the mortgage advance'. They included a cheque for $4,400 to Split Cycle and a cheque to 'Overseas Travel Service' for $111,967.50. The heading indicated that the total amount of the advance was $130,000. This letter also contained the following sentence:-

Thank you for your assistance, when you have the mortgage documents, please advise & I will come and collect the cheque.

32 Letter to Mr Theos dated 4 December 2002 (P22): the Solicitor enclosed 'for your records' a copy of a 'Heads of Agreement' dated 2 November 2002 between Mr Hadid and Ms Anna Palumbo.

33 The Law Society also relied on the conversations between the Solicitor and Mr Theos described in P10, P13, P17, P19 and P21, and on the fact that, as alleged in P18, the Solicitor attended the settlement of the mortgage loan at Mr Theos' office and received the cheques payable to Split Cycle and to Overseas Travel Service.

34 Mr Theos' testimony in relation to these matters was as follows.

35 Conversation on 20 November 2002 (P10): In his affidavit, Mr Theos stated as follows: (a) he told the Solicitor that the mortgage documents for the loan to 'your clients' had been prepared; (b) the Solicitor asked that they be left at the reception desk of Mr Theos' office; and (c) the Solicitor said also that he would 'come and collect them today'.

36 In cross-examination, Mr Theos acknowledged (i) that the Solicitor might have said that 'some-one' would come and collect the documents and (ii) that he did not know who in fact collected them. In view of these doubts on his part, we do not find that the Solicitor said that he would collect the documents or that he did collect them

37 Conversation on 22 November 2002 (P13): In his affidavit, Mr Theos stated (a) that he asked the Solicitor to obtain evidence of current insurance and evidence as to the amount currently owed to the first mortgagee and (b) that the Solicitor said he would 'forward these documents to your office'. This account was not challenged in cross-examination.

38 Conversation on 22 November 2002 (P17): In his affidavit and in cross-examination, Mr Theos gave the following account of this conversation. He told the Solicitor that he had received the cheque direction and asked 'Who is Overseas Travel and where do they fit into the transaction?' The Solicitor replied that that was 'the business that my clients are purchasing'. Mr Theos then asked as to the identity of Split Cycle. The Solicitor replied that that was his own company and that 'we are getting these fees for arranging the loan for Mr and Mrs Hadid'.

39 In cross-examination, Mr Theos added that he thought it 'peculiar' that Split Cycle should be receiving these fees, since he believed that the Solicitor was acting for Mr and Mrs Hadid in the capacity of solicitor.

40 Conversation on 25 November 2002 during settlement of the mortgage loan (P19): In his affidavit, Mr Theos testified as follows. On or about 22 November 2002, he observed that the mortgage documents that he had received, bearing the signatures of Mr and Mrs Hadid, contained statements by them that they had received independent legal advice about the loan and the mortgage documents from a solicitor called Lorenzo Flammia. In accordance with his usual practice when acting for Response Finance, he telephoned Mr Flammia and obtained confirmation from him that he had indeed provided this advice.

41 At the beginning of the settlement on 25 November 2002, Mr Theos asked the Solicitor whether he was acting for Mr and Mrs Hadid. The Solicitor replied that he was. Mr Theos then asked why he had not given independent advice or explained the mortgage documents to them. The Solicitor replied that they lived 'far away', that it was 'much easier for them to go to another solicitor', that he had 'formal instructions to act for them and to draw the money', and that they had an 'informal agreement' to purchase the travel agency business. After Mr Theos had given to the Solicitor the cheques in favour of Split Cycle and Overseas Travel Service, the two of them discussed private mortgage work generally and a lender for whom the Solicitor acted.

42 In cross-examination, Mr Theos added that during his conversation with Mr Flammia he was told that Mr Flammia had witnessed the signatures of Mr and Mrs Hadid on the mortgage document. He maintained that he continued to believe that their solicitor in the transaction was the Solicitor, even after he had learnt of Mr Flammia's involvement and even though the signed mortgage documents did not come to him from the Solicitor. He agreed with Mr Allen, however, that the information that he received from Mr Flammia constituted a 'major reason' why he proceeded with the loan transaction. He agreed also that although the only purpose for which the Solicitor attended the settlement would appear to have been to collect the two cheques, a document shown to him while in the witness box (but not put into evidence) indicated that they were in fact sent to the Solicitor on the day following the settlement.

43 When asked in cross-examination whether the Solicitor had used the phrase 'formal instructions' with reference to his role in this transaction, Mr Theos said that he was 'pretty sure' of this. In view of this doubt on his part, we do not find that this phrase was used.

44 Conversation on 2 December 2002 (P21): In his affidavit, Mr Theos stated that this conversation occurred after he had received a telephone call from a person claiming to be Mr Hadid, who seemed 'agitated and surprised' because a caveat had been placed on the title to his property. When Mr Theos rang the Solicitor and told him about this, the Solicitor replied that Mr and Mrs Hadid 'know what this is about because I acted on the instructions'. In cross-examination, Mr Theos acknowledged that he could not remember the exact words used by the Solicitor.

45 Finally, the Law Society relied in this context on the Solicitor's admitted conduct in forwarding to Ms Bradaric the documents that he received from Mr Fisher (see P4 and P7).

46 In his written submissions, Mr Allen did not address the Law Society's claim that the Solicitor, in acting on behalf of Mr and Mrs Hadid in the manner outlined in the Particulars, did so in the capacity of a solicitor. Towards the end of his oral submissions, he conceded that the Tribunal would 'probably find' that this claim was made out.

47 We are indeed satisfied on this score. We find that, for the reasons asserted by the Law Society, the Solicitor purported to act as the solicitor for Mr and Mrs Hadid in the matter of their obtaining the loan of $130,000 from Mrs Khan on the security of their property at Punchbowl. He did so by engaging in the conduct described in P2, P4, P5, P7, P8, P10 (subject to the qualification noted above at [36]), P13, P16, P17, P18, P19 (subject to the qualification noted at [43]), P21 and P22.

48 This conduct principally involved (a) sending letters to representatives of the lender that were on the letterhead of his firm; (b) describing himself as the solicitor for Mr and Mrs Hadid in conversations with Mr Theos; and (c) taking steps - notably obtaining and forwarding documents required by the lender's representatives, giving directions for payments of the money advanced and attending settlement - that are commonly taken by solicitors acting for borrowers. Nothing that the Solicitor said or did suggested to those dealing with him that he was acting otherwise than as a solicitor.

49 Lack of instructions to act in the capacity of solicitor. The Solicitor admitted this component of the Law Society's case. There is nothing in the evidence to suggest that this admission was misguided.

50 We find accordingly that the Solicitor purported to act as the solicitor for Mr and Mrs Hadid without having received instructions from them to do so. An associated finding that we make is that at the time of the relevant conduct by him he knew that he had no instructions of this nature. An allegation to this effect is conveyed by the phrases 'purporting to act' in Ground 1 of the Amended Application and 'to his knowledge' in Ground 2.

51 The Solicitor claimed in his Reply, however, that he did have instructions from Mr Hadid to act as a mortgage broker. The evidence relating to this question was as follows.

52 In his affidavit, Mr Hadid said that Ms Anna Palumbo introduced the Solicitor to him. She described the Solicitor as a friend of hers and as a solicitor.

53 Ms Palumbo was the owner of the travel agency called Overseas Travel Service, to which about $110,000 forming part of the loan of $130,000 was paid pursuant to the direction given by the Solicitor (see P17 and P18). She was also one of the signatories to the Heads of Agreement referred to in P22.

54 In his affidavit, Mr Hadid said initially that this first meeting with the Solicitor occurred some time in 2002. Later in the affidavit, however, he said that it was in January 2003. In cross-examination, he acknowledged (a) that he might have met the Solicitor as early as May 2002, (b) that on 16 November 2002 there was a meeting at which he, the Solicitor, Ms Irena Bradaric and a number of other people were present and (c) that during November 2002 he might have contacted the Solicitor more than once by telephone.

55 Mr Hadid maintained that he never instructed the Solicitor to act on his behalf in any transaction involving a loan to Ms Palumbo 'or otherwise', that he did not ask the Solicitor to give the directions for payments from the mortgage loan contained in the Solicitor's letter of 22 November 2002 to Mr Theos (see P16) and that he never discussed financial matters with the Solicitor. In his affidavit, he referred to a statement by Ms Palumbo, made to him in or about September 2002, that she might contact the Solicitor about obtaining a loan. In cross-examination, however, he denied that this occurred and also denied being told that the Solicitor 'obtained loans for people'.

56 Ms Bradaric, in her affidavit sworn for the purposes of the Supreme Court proceedings, described herself as a self-employed finance broker. She stated that during May 2002 she was present at a meeting at the office of Overseas Travel Service, which was also attended by Mr Hadid and Ms Palumbo (among others). Proposals for bringing bonds from a Swiss bank to Australia were discussed. She said that when a finance broker called Tony Caradona mentioned the Solicitor, describing him as 'very smart', Mr Hadid said to Mr Caradona 'Can you get him to contact me?'

57 During examination in chief in the present proceedings, Ms Bradaric said that she understood from the discussion at this meeting that the Solicitor was going to do 'legal work' relating to bringing the bonds from overseas. When asked in cross-examination whether Mr Hadid did in fact ask Mr Caradona to request the Solicitor to contact him, she said that she could not remember.

58 Ms Bradaric also testified as follows:

(a) At some time before November 2002, she met the Solicitor, in a group of people that included Mr Caradona, Ms Palumbo and Mr Hadid. She did not meet the Solicitor again during 2002. During that year, however, she met Mr Hadid quite frequently in the company of Ms Palumbo.

(b) In October or November 2002, she received a telephone call from Mr Hadid and Ms Palumbo, who requested her to obtain finance in the amount of $100,000. She believed that Mr Hadid realised that some form of security would have to be provided. Having contacted a number of possible sources without success, she asked the Solicitor to assist.

(c) In October or November 2002, the Solicitor faxed to her an incomplete form of application for finance. She forwarded this form to Ms Palumbo. Soon after, she received the form back from Ms Palumbo, bearing the signatures of Mr and Mrs Hadid and specifying $130,000 as the amount applied for. She then sent the completed form (a copy of which was annexed to her affidavit) to the Solicitor.

(d) Subsequently, at some time before 20 November 2002, Mr Hadid called her and asked when the application would be approved. She said that he should contact Ms Palumbo and/or the Solicitor, as she had merely forwarded the application to the Solicitor 'as requested'. She said also (incorrectly) that the amount applied for was $100,000, whereupon Mr Hadid said that it was 'only for $30,000'. (When it was put to her during cross-examination that this conversation did not occur, Mr Bradaric adhered to her account of it).

(e) On or about 20 November 2002, she received by fax from the Solicitor a letter of offer from Response Finance (a copy of which was annexed to her affidavit). She sent it to Ms Palumbo by fax.

59 Mr Allen drew to our attention a three-page handwritten document within the bundle of material, tendered by the Law Society, that had been admitted as evidence in the Supreme Court proceedings. He submitted that this document should be accepted as a copy of a file note prepared by the Solicitor and as evidence that on 16 November 2002, at a meeting that Mr Hadid had admitted to attending, Mr Hadid instructed the Solicitor to act for him as a mortgage broker.

60 This copied document was headed 'Conference - Albert Haddid - Irena Bradaric'. It contained the phrases 'Need [Mortgage Documents Signed]', '[Money placed into Overseas Travel Account] (majority)', '2 months', 'Interest Upfront' and 'Fee Upfront'. Mr Allen pointed out that these features were to be found in the loan subsequently made by Mrs Khan to Mr and Mrs Hadid.

61 In her affidavit, Mrs Hadid stated that she had never met the Solicitor and that she did not at any stage instruct him to act on her behalf in this or any other transaction. These assertions were not challenged during her cross-examination.

62 With regard to this claim by the Solicitor that Mr Hadid furnished instructions to him to act as a mortgage broker, the Solicitor was, in our opinion, subject to an evidentiary onus. The question whether the claim is true does not arise on account of anything alleged by the Law Society, but because the Solicitor included it in his Reply.

63 In our judgment, the Solicitor has not discharged this evidentiary onus, for the following four reasons.

64 First, one of the two witnesses who were in a position to furnish direct evidence that he received instructions to act as a mortgage broker - i.e., the Solicitor himself - chose not to testify. In such circumstances, the following statement of principle in the Court of Appeal's judgment in Prothonotary of the Supreme Court of New South Wales v Nikolaidis [2010] NSWCA 73 at [25] is applicable:-

25 In circumstances where the respondent chooses not to come forward to assist by giving evidence in the disciplinary proceeding, the failure to provide an exculpatory statement or explanation means that inferences from proved facts can be drawn more safely because the defendant has failed to give any explanation of matters peculiarly within his knowledge...

65 As Mr Barnes pointed out in his written submissions, the Tribunal, in Council of the Law Society of New South Wales v Clapin (No 2) [2011] NSWADT 246 at [59], held that in such circumstances it should 'put to one side the possibility that presumptively improper conduct on [the respondent's] part could and in fact should have been characterised as innocent'.

66 Our second reason is that the other witness who could furnish direct evidence - Mr Hadid - denied instructing the Solicitor to act as a mortgage broker. Even though, for reasons outlined below, we found Mr Hadid to be an unreliable witness, it does not follow that we should treat his denial of this particular allegation as evidence in support of the allegation.

67 Thirdly, Ms Bradaric's testimony did not indicate that Mr Hadid communicated instructions to employ the Solicitor as a broker, either directly or through Ms Bradaric herself. Her accounts of meetings at which Mr Hadid was present and the Solicitor was present or was mentioned contained no allegation that she witnessed any such instructions being given. Her evidence about her telephone conversation with Mr Hadid and Ms Palumbo in October or November 2002 did not suggest that Mr Hadid authorised her as his agent to engage the Solicitor (or anyone else) as a broker with respect to the proposed loan. To the extent that her subsequent correspondence with the Solicitor and Ms Palumbo involved the transmission of documents relating to the loan, it was entirely compatible with the Law Society's allegation that the Solicitor purported to act as a solicitor without having had instructions to do so.

68 Fourthly, we do not attribute any weight to the document that Mr Allen claimed to be a copy of the Solicitor's file note of a meeting between Mr Hadid, Ms Palumbo and himself on 16 November 2002. This is for three reasons. First, even though the document might have been admitted in the Supreme Court proceedings and was tendered in the present proceedings by the Law Society, we are not obliged to treat it as authentic. Secondly, the alleged maker of the document - the Solicitor - did not make himself available to be cross-examined on it. Thirdly, while the document was claimed to be a file note recording a meeting on 16 November 2002, the date written at the top is actually '16/11/03'.

69 For the foregoing reasons, we find that, despite his claim to the contrary, the Solicitor did not receive instructions from Mr or Mrs Hadid to act as their mortgage broker.

70 The extent, if any, to which Mr and Mrs Hadid had knowledge of the matter. A considerable proportion of the hearing was devoted to evidence on this question. For reasons that will become apparent, however, we do not think it necessary to review all this evidence. The following outline of certain aspects of it will suffice.

71 Mr Hadid maintained in his affidavit that during September 2002 he agreed to provide a personal guarantee for a loan of up to $30,000 to Ms Palumbo, who was experiencing financial problems. He told her, however, that he would not provide security over the property at Punchbowl (in which he resided with his wife and family). He gave her various identity documents, including an insurance policy relating to this property, in order that she might obtain a loan of this nature with him as guarantor.

72 During cross-examination, however, it was put to him that in the statement of claim that he filed in the Supreme Court proceedings he pleaded that he had agreed to assist Ms Palumbo to obtain a loan of $30,000 provided that the lender agreed to accept as security a second mortgage over his home at Punchbowl. He was unable to explain satisfactorily the contradiction between this part of the statement of claim and his assertion in his affidavit that he told Ms Palumbo that he was not willing to provide security over his home for any loan to her.

73 In cross-examination, it was also put to him that he obtained from the insurer of his home an insurance certificate dated 22 November 2002. He said that he did not think that he had done so. He was then shown an extract from the transcript of his evidence in the Supreme Court proceedings, in the course of which he said that he did in fact obtain a certificate dated 22 November 2002 and that he gave it to Ms Palumbo. Significantly, this certificate contained an annotation that Response Finance held a second mortgage over the property. Mr Hadid could not satisfactorily explain this contradiction.

74 For these and other reasons, which we need not outline here, we regard Mr Hadid as an unreliable witness. In particular, we do not accept his assertion that he never agreed to provide security, in the form of a second mortgage over his family home for a loan to Ms Palumbo.

75 In view of this finding, we make the further finding that the Law Society, which on this question bears the onus of proof, has failed to establish that Mr Hadid 'had no knowledge' of 'the matter'. 'The matter' in this context is, as Ground 1 of the Amended Application states, the acquisition by Mr and Mrs Hadid of 'an advance of the sum of $130,000 from Mrs Abeeda Khan... on the security of their property at 662 Punchbowl Road, Punchbowl'.

76 It may well be that, as Mr Hadid alleged, he did not realise that the mortgage documents being prepared provided for a loan as large as $130,000. It may equally be the case that, as he and Mrs Hadid alleged, they never received independent advice from Mr Fiamma and their signatures on the mortgage document were forged. But our conclusion that Mr Hadid did know that a loan secured on his family home was being arranged is sufficient to warrant rejection of the Law Society's claim that he had 'no knowledge of the matter'.

77 Mrs Hadid stated in her affidavit that she remembered Mr Hadid telling her, at some time before November 2002, that he might provide a personal guarantee for a loan of up to $30,000. She believed that any such guarantee would have related to his business as a builder. She knew also that at times Mr Hadid spoke to a person called Anna on the telephone. As indicated earlier, she stated further that she had never met the Solicitor and that she did not at any stage instruct him to act on her behalf in this or any other transaction.

78 While none of these assertions was directly challenged in cross-examination, it was put to her that Mr Hadid told her late in 2002 that he would be furnishing financial assistance to Ms Palumbo and that for this purpose a mortgage would have to be given over their home. But while admitting that her memory of the events of 2002 was not very good, she maintained that there was 'no talk of a mortgage'.

79 Mrs Hadid appeared to us to be an honest witness. Even allowing for her admission that there were gaps in her recollection, we incline to the view that, unlike her husband, she did not have any 'knowledge' of 'the matter'.

80 For the foregoing reasons, our conclusion with regard to Ground 1 of the Amended Application is that it has been established, except for the specific allegation contained in subparagraph (ii).

Ground 2: Making representations known to be false and misleading

81 In this Ground, it is alleged that the Solicitor, in engaging in the conduct described in Ground 1 (including subparagraph (i)), made false and misleading representations to three people who were professionally involved in completing the mortgage transaction. These people were a finance broker (Mr Fisher), the mortgagee's solicitor (Mr Theos) and an agent of the mortgagee (Mr Littleford). The representations, which the Solicitor knew to be false, were in each case to the effect that he had been instructed to act as solicitor for Mr and Mrs Hadid, the mortgagors.

82 The representations made by the Solicitor on which the Law Society relied in advancing this Ground were described in the following Particulars: 2, 5, 8, 9, 10, 13, 14, 15, 16, 17, 18, 19 and 21. Except for those described in P9 (which was not pressed) and P15 (as to which there was no evidence), we have found these representations to be proven, subject to some minor qualifications relating to P10 and P19.

83 We agree with the Law Society that these representations were both false and misleading by virtue of the matters stated in the following Particulars: 2A, 2B, 5A, 8A, 8B, 10A, 13A, 14A, 15A, 16A, 16B, 17A, 17B, 18A, 19A, 19B and 21A. We also agree that, for reasons given earlier, the Solicitor knew these representations to be false.

84 In so concluding, we reject a submission by Mr Allen that if we decided that the Law Society had failed to prove Ground 1 in toto, we would be obliged to dismiss Ground 2. We agree that this would be the case if subparagraph (i) of Ground 1 were not established alongside the allegation of 'purporting to act' made in the opening sentence of this Ground. But to this significant extent, we have upheld Ground 1. The question raised in subparagraph (ii) of Ground 1 - whether or not Mr and Mrs Hadid had any 'knowledge of the matter' - is not relevant to the question whether the Solicitor acted as alleged and particularised in Ground 2.

85 We also reject a submission by Mr Allen opposing Ground 2 on the basis that (a) it was Mr Fiamma who represented that Mr and Mrs Hadid had accepted the offer of a mortgage loan and (b) this, as Mr Allen expressed it, was the 'operative misleading conduct'. Any such conduct by Mr Fiamma is wholly irrelevant to the quite separate misrepresentations by the Solicitor that Mr and Mrs Hadid had instructed him to act as their solicitor.

86 We should add that even if, contrary to what we have determined, Mr and Mrs Hadid did authorise the Solicitor to act as a mortgage broker, this would not detract from our finding that Ground 2 has been established. We do not accept Mr Allen's contention that as long as we concluded that the Solicitor received instructions from them to 'act' in some capacity, Ground 2 should fail.

87 For the foregoing reasons, Ground 2 is made out, except as to the matters particularised in P9, P9A, P15 and P15A.

Ground 3: Directing a payment without entitlement to do so

88 As stated in P16, the Solicitor, in a letter to Mr Theos dated 22 November 2002, gave directions as to how the mortgage advance should be paid, including a direction a cheque for $4,400 should be drawn in favour of Split Cycle. In a conversation on the same day with Mr Theos (see P17), he stated that Split Cycle was his company and that 'we are getting these fees for arranging the loan for Mr and Mrs Hadid'. He received the requested cheque at the settlement on 25 November 2002 (see P18).

89 In his submissions relating to this Ground, Mr Barnes pointed out that there was no document or other evidence showing that an agreement had been reached between Mr and Mrs Hadid, pursuant to which Split Cycle was or might be entitled to payment of the fee of $4,400 which it received on the settlement of the mortgage loan.

90 He pointed out also that there was no explanation of the increase in the amount of this fee from $3,300 (see P8) to $4,400.

91 By virtue of these considerations, and because the Solicitor had opted not to testify, Mr Barnes argued that Ground 3 was 'undoubtedly made out'.

92 In opposing this argument, Mr Allen relied on a handwritten document, annexed to Ms Foord's affidavit, that should, in his submission, be acknowledged as a file note prepared by the Solicitor. It contained the following passage:-

20/11/02 T/A - IRENA

$3,300 - Split Cycle International P/L - $3,300

93 Mr Allen argued that this passage recorded a telephone conversation with Ms Bradaric on 20 November 2002, during which the payment of a fee of $3,300 to Split Cycle was mentioned.

94 Further submissions made by Mr Allen were as follows: (a) because the phrase 'no entitlement' in Ground 3 was not explained, the Ground was 'manifestly bad' and for this reason alone should be dismissed; (b) the Solicitor performed work - i.e., obtaining an offer of finance - for which he was entitled to be paid; and (c) it was not pleaded that the Solicitor knew that he had 'no entitlement'.

95 In our judgment, Ground 3 is established, effectively by virtue of our conclusion that the Solicitor did not receive instructions from Mr and Mrs Hadid to act as their mortgage broker. In the absence of any such instructions, and of any other agreement whereby they were obliged to pay to him or to Split Cycle any fees for services rendered, he was clearly not entitled to direct that this sum of $4,400 be paid to Split Cycle. Even if we had found that they did engage him as a mortgage broker, it would not follow that he, or Split Cycle, could unilaterally determine that a fee in this amount was payable, let alone the amount of this fee.

96 In so determining, we attribute no weight to the 'file note' annexed to Ms Foord's affidavit. We have doubts about this document similar to those that we maintain about the document claimed to be a file note of a meeting on 16 November 2002 (see [68] above). Furthermore, the passage on which Mr Allen relied appears merely to indicate that the Solicitor discussed with Ms Bradaric a payment of $3,300 to Split Cycle. It does not bear on the question whether he or Split Cycle was entitled to extract the amount of any such payment from the mortgage loan.

97 Our final observations on this Ground, responding to submissions by Mr Allen, are (a) that we do not regard the meaning of the phrase 'no entitlement' as uncertain and (b) that our finding with regard to the Ground does not include a finding that the Solicitor knew that he had no entitlement to the payment.

Characterisation of the Solicitor's conduct

98 At this point, we should observe that, although the conduct of the Solicitor with which these proceedings are concerned occurred some years before the LP Act came into force on 1 October 2005, the fact that the relevant complaints were made and the proceedings commenced after that date has the effect that they are to be determined under this Act. This follows from clause 17(2) of Schedule 9 of the Act, and is subject to the following provision in clause 17(4): 'The Commissioner, a Council or the Tribunal may not make any determination or order of a disciplinary nature against the person in respect of whom the complaint was made that is more onerous than that which could have been made under the old Act.'

99 We should also observe that the Law Society did not allege participation by the Solicitor in any fraud that was, or may have been, committed against Mr and/or Mrs Hadid by virtue of the events outlined in the Particulars.

100 Mr Barnes submitted that we should make a finding of professional misconduct with respect to each of the three Grounds. He cited the well-established criterion of professional misconduct at common law deriving from the judgment of the English Court of Appeal in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750: namely, whether the conduct in question would be 'reasonably regarded as disgraceful and dishonourable' by fellow-practitioners 'of good repute and competency'.

101 In the alternative, Mr Barnes argued that the Solicitor's conduct under each Ground fell within the definition of professional misconduct in section 497(1)(b) of the LP Act: viz 'conduct of an Australian legal practitioner whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice'.

102 In developing these submissions, Mr Barnes referred to the following well-known statement of principle in the judgment of Spigelman CJ in New South Wales Bar Association v Cummins (2001) 52 NSWLR 279 at 284; [2001] NSWCA 284 at [19 - 20]:-

19 Honesty and integrity are important in many spheres of conduct. However, in some spheres significant public interests are involved in the conduct of particular persons and the state regulates and restricts those who are entitled to engage in those activities and acquire the privileges associated with a particular status. The legal profession has long required the highest standards of integrity.

20 There are four interrelated interests involved. Clients must feel secure in confiding their secrets and entrusting their most personal affairs to lawyers. Fellow practitioners must be able to depend implicitly on the word and the behaviour of their colleagues. The judiciary must have confidence in those who appear before the courts. The public must have confidence in the legal profession by reason of the central role the profession plays in the administration of justice. Many aspects of the administration of justice depend on the trust by the judiciary and/or the public in the performance of professional obligations by professional people.

103 With reference particularly to Ground 2, he relied on a passage in the Tribunal's decision in Law Society of New South Wales v MacKenzie [2003] NSWADT 92. The conduct of the respondent solicitor to which the passage refers occurred while she was acting for the defendant in Local Court proceedings. In a letter to the plaintiffs, who were a firm of solicitors, she stated that a defence had been entered to their statement of claim. At [14], the Tribunal found that this statement was false, to her knowledge, and was 'clearly calculated to mislead'. At [15 - 16], it said:-

15 The proposition that, knowingly, and, in some cases, negligently, to mislead another legal practitioner with respect to a matter significantly relevant to professional business is serious professional misconduct needs no judicial authority. Such conduct undermines one of the foundations of trust that the community has to be able to place in legal practitioners, namely, that what one practitioner says to another in the furtherance of practice can be accepted without question as having been made both truthfully and carefully. It is analogous with, the duty of a legal practitioner to avoid misleading a court, or with the duty to adhere to an undertaking given to another practitioner in the course of legal practice. We could wax eloquent about the consequences of legal practitioners being permitted with impunity to mislead other practitioners but such elementary and fundamental matters do not require to be elaborated, especially to the audience by whom these reasons may be read.

16 We find that the letter... was misleading in a material respect and that its publication by the Solicitor to [the plaintiffs] amounted to professional misconduct...

104 This passage is quoted in part in Riley, Solicitors Manual at [35,040.5]. The accompanying text commences as follows:-

The making of knowingly or recklessly false statements, whether written or oral, by a lawyer to third parties, such as other lawyers or even a client, is prima facie evidence of misconduct. This is because... lawyers rely heavily on the ability to trust one another's word...

105 In his Reply, the Solicitor maintained that by virtue of his 'mistake' in writing to Mr Littleford and Mr Theos on the letterhead of Hancock Solicitors (see [14 above), his conduct might appropriately be characterised as unsatisfactory professional conduct, but not as professional misconduct.

106 Mr Allen's submissions did not address the question of how the Solicitor's conduct should be characterised.

107 In our judgment, the Solicitor's conduct under each of the three Grounds, considered separately, amounted to professional misconduct.

108 As to Ground 1, we consider that a legal practitioner who assumes the role of the solicitor acting for parties who are borrowing substantial funds on the security of their residence, without instructions and in the knowledge that no instructions have been provided, acts in a 'disgraceful and dishonourable' manner. He or she violates the fundamental principle that legal practitioners must only perform the professional tasks that they know, or reasonably believe, to have been entrusted to them.

109 In the present case, the consequences of the Solicitor behaving in this way must be deemed less serious than the Law Society claimed because we did not find that Mr and Mrs Hadid had 'no knowledge of the matter' (as was alleged in subparagraph (ii) of Ground 1). But this was a serious breach of his professional duties irrespective of the consequences.

110 With regard to Ground 2, we are satisfied that to mislead fellow-practitioners and other professional people, through representations known to be false, into believing that instructions to act for a borrower/mortgagor have been received is similarly 'disgraceful and dishonourable'. The reasons spelt out in Cummins and MacKenzie are directly in point.

111 As to Ground 3, the same must be said of a practitioner's use of a purported authority to give directions for payment of a mortgage loan in order to appropriate, without entitlement, a portion of the funds being lent.

112 Since we have upheld each Ground of the Amended Application, a further hearing must take place in order for us to reach a decision regarding the orders to be made under section 562 of the LP Act.

113 With this in mind, the proceedings are set down for further directions at 9.30 a.m. on Tuesday 26 March 2013.

I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.

Registrar

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Decision last updated: 21 March 2013